UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September 30,~~December 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _________________

Commission File No. 333-206097

ADDENTAX GROUP CORP.

(Exact name of registrant as specified in its charter)

Nevada		35-2521028
(State or other jurisdiction of		(I.R.S. Employer
incorporation or formation)		Identification Number)

Kingkey 100, Block A, Room 4805,

Luohu District, Shenzhen City, China 518000

(Address of principal executive offices)

+ (86) 755 86961 405

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		ATXG		Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of ~~2022,~~February 14, 2023, there were ~~31,093,004~~35,454,670 shares outstanding of the registrant’s common stock.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	F-3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16

Item 4.	Controls and Procedures	16

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	17

Item 1A.	Risk Factors	17

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3.	Defaults Upon Senior Securities	17

Item 4.	Mine Safety Disclosures	17

Item 5.	Other Information	17

Item 6.	Exhibits	17

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

ADDENTAX GROUP CORP.

FINANCIAL STATEMENTS

For the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021

TABLE OF CONTENTS

Condensed Consolidated Balance sheets as of ~~September 30,~~December 31, 2022 and March 31, 2022 (unaudited)	F-4
Condensed Consolidated Statements of Income and Comprehensive Income for the ~~Six~~nine months ended June 30, 2022 and 2021 (unaudited)	F-5
Condensed Consolidated Statements of Changes in Equity for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 (unaudited)	F-6
Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 (unaudited)	F-7
Notes to Condensed Consolidated Financial Statements for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 (unaudited)	F-8 – F-16

F-3

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars, except share data or otherwise stated)

(UNAUDITED)


	September 30, 2022			March 31, 2022			December 31, 2022			March 31, 2022

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	2,034,410		$	1,390,644		$	1,588,385		$	1,390,644
Accounts receivables, net		1,895,213			2,164,970			2,090,372			2,164,970
Debt securities held-to-maturity		17,500,000			-			17,500,000			-
Inventories		247,335			266,596			254,692			266,596
Prepayments and other receivables		4,561,827			575,210			4,791,716			575,210
Advances to suppliers		1,158,364			1,181,466			1,054,827			1,181,466
Amount due from related party		36,122			110,242			-			110,242
Total current assets		27,433,271			5,689,128			27,279,992			5,689,128

NON-CURRENT ASSETS
Plant and equipment, net		684,949			836,419			675,402			836,419
Long-term prepayments		122,138			31,496			73,504			31,496
Operating lease right of use asset		4,221,393			6,530,017			3,548,168			6,530,017
Total non-current assets		5,028,480			7,397,932			4,297,074			7,397,932
TOTAL ASSETS	$	32,461,751		$	13,087,060		$	31,577,066		$	13,087,060

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loan	$	134,245		$	151,090		$	138,265		$	151,090
Accounts payable		114,598			1,334,483			159,414			1,334,483
Amount due to related parties		2,469,127			3,694,989			2,057,822			3,694,989
Advances from customers		2,538			2,375			5,291			2,375
Accrued expenses and other payables		2,486,643			1,445,473			2,760,150			1,445,473
Operating lease liability current portion		3,343,271			3,763,931			3,383,626			3,763,931
Total current liabilities		8,550,422			10,392,341			8,504,568			10,392,341

NON-CURRENT LIABILITIES
Operating lease liability		878,123			2,766,086			164,542			2,766,086
TOTAL LIABILITIES	$	9,428,545		$	13,158,427		$	8,669,110		$	13,158,427

EQUITY (deficit)
Common stock ($0.001 par value, 50,000,000 shares authorized, 31,693,004 shares and 26,693,004 shares issued and outstanding at September 30 and March 31, 2022, respectively)	$	31,693		$	26,693
Common stock ($0.001 par value, 50,000,000 shares authorized, 31,693,004 shares and 26,693,004 shares issued and outstanding at December 31 and March 31, 2022, respectively)							$	31,693		$	26,693
Additional paid-in capital		29,532,326			6,815,333			29,532,326			6,815,333
Accumulated Deficit		(6,576,342	)		(6,756,230	)		(6,673,191	)		(6,756,230	)
Statutory reserve		13,821			13,821			28,452			13,821
Accumulated other comprehensive loss		31,708			(170,984	)		(11,324	)		(170,984	)
Total equity (deficit)		23,033,206			(71,367	)		22,907,956			(71,367	)
TOTAL LIABILITIES AND EQUITY	$	32,461,751		$	13,087,060		$	31,577,066		$	13,087,060

See accompany notes to the unaudited condensed consolidated financial statements.

F-4

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In U.S. Dollars, except share data or otherwise stated)

													2022			2021			2022			2021
	Three months ended September 30,						Six months ended September 30,						Three months ended December 31,						Nine months ended December 31,
	2022			2021			2022			2021			2022			2021			2022			2021

REVENUES	$	2,144,019		$	2,757,832		$	4,530,403		$	7,044,263		$	2,122,242		$	2,791,470		$	6,652,645		$	9,835,733

COST OF REVENUES		(1,578,858	)		(2,287,407	)		(3,508,558	)		(5,990,433	)		(1,514,780	)		(2,323,716	)		(5,023,338	)		(8,314,149	)

GROSS PROFIT		565,161			470,425			1,021,845			1,053,830			607,462			467,754			1,629,307			1,521,584

OPERATING EXPENSES
Selling and marketing		(30,002	)		(45,802	)		(35,644	)		(92,192	)		(24,511	)		(43,118	)		(60,155	)		(135,310	)
General and administrative		(465,007	)		(462,886	)		(869,947	)		(923,201	)		(675,918	)		(452,312	)		(1,545,865	)		(1,375,513	)
Total operating expenses		(495,009	)		(508,688	)		(905,591	)		(1,015,393	)		(700,429	)		(495,430	)		(1,606,020	)		(1,510,823	)

INCOME (LOSS) FROM OPERATIONS		70,152			(38,263	)		116,254			38,437
(LOSS) INCOME FROM OPERATIONS														(92,967	)		(27,676	)		23,287			10,761

Interest income		1,762			96			5,000			2,063			1,687			72			6,687			2,135
Interest expenses		(2,209	)		(617	)		(4,667	)		(2,849	)		(1,986	)		(2,526	)		(6,653	)		(5,375	)
Other income, net		22,973			75,764			74,056			89,001			19,232			43,958			93,288			132,959

INCOME BEFORE INCOME TAX EXPENSE		92,678			36,980			190,643			126,652
(LOSS) INCOME BEFORE INCOME TAX EXPENSE														(74,034	)		13,828			116,609			140,480
INCOME TAX EXPENSE		(9,461	)		(4,959	)		(10,755	)		(15,684	)		(8,184	)		(2,209	)		(18,939	)		(17,893	)

NET INCOME		83,217			32,021			179,888			110,968
NET (LOSS) INCOME														(82,218	)		11,619			97,670			122,587
Foreign currency translation gain (loss)		97,543			(3,626	)		202,692			(34,142	)		(43,032	)		(28,755	)		159,660			(62,897	)
TOTAL COMPREHENSIVE INCOME	$	180,760		$	28,395		$	382,580		$	76,826
TOTAL COMPREHENSIVE (LOSS) INCOME													$	(125,250	)	$	(17,136	)	$	257,330		$	59,690

EARNINGS PER SHARE
Basic and diluted		0.00			0.00			0.01			0.00			(0.00	)		(0.00	)		0.00			0.00
Weighted average number of shares outstanding – Basic and diluted		27,117,662			26,405,333			27,117,662			26,405,333			28,377,936			26,556,566			28,377,936			26,556,566

See accompany notes to the unaudited condensed consolidated financial statements.

F-5

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In U.S. Dollars, except share data or otherwise stated)

																			Shares	Amount		paid-in capital		Unrestricted			Statutory reserve		comprehensive loss			Total Equity
	Common Stock				Additional		Retained earnings (accumulated deficit)					Accumulated other						Common Stock				Additional		Retained earnings (accumulated deficit)					Accumulated other
		Shares		Amount		paid-in capital		Unrestricted			Statutory reserve		comprehensive loss			Total Equity		Shares		Amount		paid-in capital		Unrestricted			Statutory reserve		comprehensive loss			Total Equity
BALANCE AT JUNE 30, 2021		26,693,004	$	26,093	$	6,815,333	$	(6,755,281	)	$	13,821	$	(133,633	)	$	(33,067	)
BALANCE AT SEPTEMBER 30, 2021																			26,693,004	$	26,093	$	6,815,333	$	(6,723,260	)	$	13,821	$	(137,259	)	$	(4,672	)
Foreign currency translation		-		-		-		-			-		(3,626	)		(3,626	)		-		-		-		-			-		(28,755	)		(28,755	)
Net income for the period		-		-		-		32,021			-		-			32,021			-		-		-		11,619			-		-			11,619
BALANCE AT SEPTEMBER 30, 2021		26,693,004	$	26,693	$	6,815,333	$	(6,723,260	)	$	13,821	$	(137,259	)	$	(4,672	)
BALANCE AT DECEMBER 31, 2021																			26,693,004	$	26,693	$	6,815,333	$	(6,711,641	)	$	13,821	$	(166,014	)	$	(21,808	)

BALANCE AT JUNE 30, 2022		26,693,004	$	26,693	$	6,815,333	$	(6,659,559	)	$	13,821	$	(65,835	)	$	130,453
Paid in capital		5,000,000		5,000		22,716,993		-			-		-			22,721,993
BALANCE AT SEPTEMBER 30, 2022																			31,693,004	$	31,693	$	29,532,326	$	(6,576,342	)	$	13,821	$	31,708		$	23,033,206
Appropriation to Statutory Reserves																			-		-		-		(14,631	)		14,631		-			-
Foreign currency translation		-		-		-		-			-		97,543			97,543			-		-		-		-			-		(43,032	)		(43,032	)
Net income for the period		-		-		-		83,217			-		-			83,217
BALANCE AT SEPTEMBER 30, 2022		31,693,004	$	31,693	$	29,532,326	$	(6,576,342	)	$	13,821	$	31,708		$	23,033,206
Net loss for the period																			-		-		-		(82,218	)		-		-			(82,218	)
BALANCE AT DECEMBER 31, 2022																			31,693,004	$	31,693	$	29,532,326	$	(6,673,191	)	$	28,452	$	(11,324	)	$	22,907,956

BALANCE AT MARCH 31, 2021		26,693,004	$	26,093	$	6,815,333	$	(6,834,228	)	$	13,821	$	(103,117	)	$	(81,498	)		26,693,004	$	26,093	$	6,815,333	$	(6,834,228	)	$	13,821	$	(103,117	)	$	(81,498	)
Foreign currency translation		-		-		-		-			-		(34,142	)		(34,142	)		-		-		-		-			-		(62,897	)		(62,897	)
Net income for the period		-		-		-		110,968			-		-			110,968			-		-		-		122,587			-		-			122,587
BALANCE AT SEPTEMBER 30, 2021		26,693,004	$	26,693	$	6,815,333	$	(6,723,260	)	$	13,821	$	(137,259	)	$	(4,672	)
BALANCE AT DECEMBER 31, 2021																			26,693,004	$	26,693	$	6,815,333	$	(6,711,641	)	$	13,821	$	(166,014	)	$	(21,808	)

BALANCE AT MARCH 31, 2022		26,693,004	$	26,693	$	6,815,333	$	(6,756,230	)	$	13,821	$	(170,984	)	$	(71,367	)		26,693,004	$	26,693	$	6,815,333	$	(6,756,230	)	$	13,821	$	(170,984	)	$	(71,367	)
Paid in capital		5,000,000		5,000		22,716,993		-			-		-			22,721,993			5,000,000		5,000		22,716,993		-			-		-			22,721,993
Appropriation to Statutory Reserves																			-		-		-		(14,631	)		14,631		-			-
Foreign currency translation		-		-		-		-			-		202,692			202,692			-		-		-		-			-		159,660			159,660
Net income for the period		-		-		-		179,888			-		-			179,888			-		-		-		97,670			-		-			97,670
BALANCE AT SEPTEMBER 30, 2022		31,693,004	$	31,693	$	29,532,326	$	(6,576,342	)	$	13,821	$	31,708		$	23,033,206
Net income (loss)																			-		-		-		97,670			-		-			97,670
BALANCE AT DECEMBER 31, 2022																			31,693,004	$	31,693	$	29,532,326	$	(6,673,191	)	$	28,452	$	(11,324	)	$	22,907,956

See accompany notes to the unaudited condensed consolidated financial statements.

F-6

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars, except share data or otherwise stated)

							2022			2021
	Six Months Ended September 30						Nine Months Ended December 31
		2022			2021		2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	179,888		$	110,968		$	97,670		$	122,587
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		171,493			71,398			264,876			115,561
Changes in operating assets and liabilities
Accounts receivable		269,757			3,216,556			74,598			3,038,527
Inventories		19,261			(30,372	)		11,904			(27,762	)
Advances to suppliers		23,102			(1,114,244	)		126,639			(1,166,916	)
Other receivables		(1,561,056	)		(399,257	)		(1,789,539	)		73,540
Accounts payables		(1,347,677	)		(1,801,257	)		(1,309,228	)		(1,899,642	)
Accrued expenses and other payables		718,539			44,382			992,046			96,276
Advances from customers		163			52,308			2,916			31,654
Net cash provided by (used in) operating activities	$	(1,526,530	)	$	150,482
Net cash (used in) provided by operating activities							$	(1,528,118	)	$	383,825

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment and other assets		-			(142,922	)		-			(176,268	)
Purchase of debt securities		(17,500,000	)		-			(17,500,000	)		-
Net cash used in investing activities	$	(17,500,000	)	$	(142,922	)	$	(17,500,000	)	$	(176,268	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of ordinary shares		20,221,993			-			20,221,993			-
Proceeds from related party borrowings		2,231,376			1,623,725			2,376,221			3,797,473
Repayment of related party borrowings		(2,803,515	)		(2,762,272	)		(3,356,829	)		(5,341,046	)
Repayment of bank borrowings		(416	)		-			(408	)		-
Net cash provided by financing activities	$	19,649,438		$	(1,138,547	)
Net cash provided by (used in) financing activities							$	19,240,977		$	(1,543,573	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		622,908			(1,130,987	)		212,859			(1,336,016	)
Effect of exchange rate changes on cash and cash equivalents		20,858			(3,421	)		(15,118	)		(2,719	)
Cash and cash equivalents, beginning of the period		1,390,644			1,845,077			1,390,644			1,845,077
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	2,034,410		$	710,669		$	1,588,385		$	506,342

Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	-		$	1,935		$	-		$	-
Cash paid during the year for income tax	$	10,755		$	15,684		$	18,939		$	17,893
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	-		$	345,847		$	-		$	342,457

See accompany notes to the unaudited condensed consolidated financial statements.

F-7

ADDENTAX GROUP CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS ACQUISITIONS

ATXG and its subsidiaries (the “Company”) are engaged in the business of garments manufacturing, providing logistic services and property leasing and management service in the People’s Republic of China (“PRC” or “China”) ~~and epidemic prevention supplies manufacturing and distribution both in China and overseas markets.~~.

2. BASIS OF PRESENTATION

In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated in consolidation. However, the results of operations included in such financial statements may not necessary be indicative of annual results.

The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on June 23, 2022 (“2022 Form 10-K”).

F-8

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

There is no change on the accounting policies for the three months ended ~~September 30,~~December 31, 2022.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. This standard will be effective for the Company on April 1, 2023. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.

F-9

4. RELATED PARTY TRANSACTIONS

SCHEDULE OF RELATED PARTIES RELATIONSHIP WITH THE COMPANY

Name of Related Parties		Relationship with the Company
Zhida Hong		President, CEO, and a director of the Company
Hongye Financial Consulting (Shenzhen) Co., ~~Ltd.~~Ltd.		A company controlled by CEO, Mr. Zhida Hong
Bihua Yang		A legal representative of Shenzhen Xin Kuai Jie Transportation Co., Ltd (“XKJ”), a wholly subsidiary of our Company
Dewu Huang		A legal representative of Shantou Yi Bai Yi Garments Co., Ltd (“YBY”), a wholly-owned subsidiary of our Company
Jinlong Huang		A spouse of legal representative of Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), a wholly owned subsidiary of our Company
Huilin Chen		A legal representative of Shenzhen Yingxi Peng Fa Logistic Co., Ltd (“PF”), a wholly-owned subsidiary of our Company

The Company leases Shenzhen XKJ office rent-free from Bihua Yang.

The Company had the following related party balances as of ~~September 30,~~December 31, 2022 and March 31, 2022:

SCHEDULE OF RELATED ~~PARTIES~~PARTY TRANSACTION

Amount due from related party		September 30, 2022		March 31, 2022	December 31, 2022		March 31, 2022
Hongye Financial Consulting (Shenzhen) Co., Ltd.	$	36,122	$	110,242	$	-	$	110,242
	$	36,122	$	110,242	$	-	$	110,242

Related party borrowings		September 30, 2022		March 31, 2022	December 31, 2022		March 31, 2022
Zhida Hong (1)	$	1,334,995	$	3,297,951
Zhida Hong (1)					$	903,398	$	3,297,951
Hongye Financial Consulting (Shenzhen) Co., Ltd.						4,909		-
Huilin Chen		702		-		724		-
Bihua Yang (2)		18,433		31,738
Bihua Yang (2)						-		31,738
Dewu Huang		1,012,052		212,290		1,057,309		212,290
Jinlong Huang		102,945		153,010		91,482		153,010
	$	2,469,127	$	3,694,989	$	2,057,822	$	3,694,989

	(1)	Being interest free loan as financial support from Zhida Hong to daily operation of the Company.

	(2)	Being financial support from Bihua Yang for XKJ’s daily operation.

	(3)	Being interest free advanced loan as financial support from Dewu Huang for YBY’s daily operation.

The borrowing balances with related parties are unsecured, non-interest bearing and repayable on demand.

5. DEBT SECURITIES HELD-TO-MATURITY

SCHEDULE OF DEBT SECURITIES ~~HELD-TO-MATURITY~~HELD TO MATURITY

September 30, 2022 March 31, 2022

Debt securities held-to-maturity $ 17,500,000 $ -

	December 31, 2022		March 31, 2022

Debt securities held-to-maturity	$	17,500,000	$	-

The Company purchased a note issued by a third-party investment company inon August 24, 2022. The principal amount of the note is $17,500,000. The note was renewable with one-year tenor and 2.5% p.a. ~~coupon.~~coupon.

6. INVENTORIES

Inventories consist of the following as of ~~September 30,~~December 31, 2022 and March 31, 2022:

SCHEDULE OF INVENTORIES

		September 30, 2022		March 31, 2022	December 31, 2022		March 31, 2022
Raw materials	$	9,048	$	184,498	$	9,319	$	184,498
Work in progress		125,568		1,327		129,328		1,327
Finished goods		112,719		80,771		116,045		80,771
Total inventories	$	247,335	$	266,596	$	254,692	$	266,596

F-10

7. ADVANCES TO SUPPLIERS

The Company has made advances to third-party suppliers in advance of receiving inventory parts. These advances are generally made to expedite the delivery of required inventory when needed and to help to ensure priority and preferential pricing on such inventory. The amounts advanced to suppliers are fully refundable on demand.

The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would recognize bad debt expense in the period they are considered unlikely to be collected.

8. PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables consist of the following as of ~~September 30,~~December 31, 2022 and March 31, 2022:

SCHEDULE OF PREPAYMENTS AND OTHER RECEIVABLES

		September 30, 2022		March 31, 2022	December 31, 2022		March 31, 2022
Prepayment		18,179		14,046		18,412		14,046
Deposit		1,233,591		64,653		1,349,669		64,653
Receivable of consideration on disposal of subsidiaries		233,162		269,798		242,139		269,798
Other receivables		3,076,895		226,713		3,181,496		226,713
Total prepayments and other receivables	$	4,561,827	$	575,210
Total Prepayment					$	4,791,716	$	575,210

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following as of ~~September 30,~~December 31, 2022 and March 31, 2022:

SCHEDULE OF PROPERTY PLANT AND EQUIPMENT

		September 30, 2022			March 31, 2022		December 31, 2022			March 31, 2022
Production plant	$	65,972		$	74,034		$	67,948		$	74,034
Motor vehicles		1,062,472			1,192,296			1,094,285			1,192,296
Office equipment		25,122			28,191			25,874			28,191
Plant and equipment, gross		1,153,566			1,294,521
Total gross								1,188,107			1,294,521
Less: accumulated depreciation		(468,617	)		(458,102	)		(512,704	)		(458,102	)
Plant and equipment, net	$	684,949		$	836,419		$	675,402		$	836,419

Depreciation expense for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 was $~~32,948~~33,817 and $~~42,008~~44,164, $~~68,832~~102,649 and $~~71,397~~115,561, respectively.

F-11

10. SHORT-TERM BANK LOAN

In August 2019, HSW entered into a facility agreement with Agricultural Bank of China and obtained a line of credit, which allows the Company to borrow up to approximately $153,172 (RMB1,000,000) for daily operations. The loans are guaranteed at no cost by the legal representative of HSW. As of ~~September 30,~~December 31, 2022, the Company has borrowed $~~134,245~~138,265 (RMB955,281) (March 31, 2022: $151,090) under this line of credit with various annual interest rates from 4.84% to 4.9%. The outstanding loan balance was due on ~~September 30, 2021~~.December 31, 2021. The Company was not able to renew the loan facility with the bank. The Company is negotiating with the bank on repayment schedule of the loan balance and interest payable.

11. INCOME TAXES

(a)	Enterprise Income Tax (“EIT”)

The Company operates in the PRC and files tax returns in the PRC jurisdictions.

Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands, and is not subject to income taxes. It’s wholly owned subsidiary of Addentax Group Corp.

Yingxi HK (Yingxi Industrial Chain Investment Co., Ltd.) was incorporated in Hong Kong which is indirectly wholly owned by Addentax Group Corp., and is subject to Hong Kong income tax at a progressive rate of 16.5%. No provision for income taxes in Hong Kong have been made as Yingxi HK had no taxable income for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021.

YX, our wholly owned subsidiary, were incorporated in the PRC and is subject to the EIT tax rate of 25%. No provision for income taxes in the PRC have been made as YX had no taxable income for the three and ~~six~~nine months ended ~~Septermber 30,~~December 31, 2022 and 2021.

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies were subject to progressive EIT rates from 5% to 15% in 2022 and 2021. The preferential tax rate will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

The Company’s parent entity, Addentax Group Corp. is a U.S entity and is subject to the United States federal income tax. No provision for income taxes in the United States have been made as Addentax Group Corp. had no United States taxable income for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021.

F-12

The reconciliation of income taxes computed at the PRC statutory tax rate applicable to the PRC, to income tax expenses are as follows:

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

	Three months ended						Six months ended					Three months ended						Nine months ended
	September 30,						September 30,					December 31,						December 31,
		2022			2021			2022		2021		2022			2021			2022			2021
PRC statutory tax rate		25	%		25	%		25	%	25	%		25	%		25	%		25	%		25	%
Computed expected benefits		23,170			9,245			47,661		31,663			(18,509	)		3,457			29,152			35,120
Temporary differences		(53,206	)		(17,388	)		(93,771	)	(56,847	)		(54,616	)		(30,951	)		(148,387	)		(87,797	)
Permanent difference		5,587			(1,230	)		3,026		248			9,933			1,444			13,278			1,691
Changes in valuation allowance		33,910			14,332			53,839		40,620			71,376			28,259			124,896			68,879
Income tax expense	$	9,461		$	4,959			10,755		15,684		$	8,184		$	2,209			18,939			17,893

(b)	Value Added Tax (“VAT”)

In accordance with the relevant taxation laws in the PRC, the normal VAT rate for domestic sales is 13%, which is levied on the invoiced value of sales and is payable by the purchaser. The subsidiaries HSW, YBY, OTX, ZHJ and YS enjoyed preferential VAT rate of 13%. The Companies are required to remit the VAT they collect to the tax authority. A credit is available whereby VAT paid on purchases can be used to offset the VAT due on sales.

For services, the applicable VAT rate is 9% under the relevant tax category for logistic company, except the branch of YXPF enjoyed the preferential VAT rate of 3% in 2022 and 2021. The Company is required to pay the full amount of VAT calculated at the applicable VAT rate of the invoiced value of sales as required. A credit is available whereby VAT paid on gasoline and toll charges can be used to offset the VAT due on service income.

12. CONSOLIDATED SEGMENT DATA

Segment information is consistent with how chief operating decision maker reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. The segment data presented reflects this segment structure. The Company reports financial and operating information in the following ~~four~~three segments:

	(a)	Garment manufacturing. Including manufacturing and distribution of garments;

	(b)	Logistics services. Providing logistic services; and

	(c)	~~Epidemic prevention supplies~~~~. Including manufacturing, distribution and trading of epidemic prevention supplies.~~

	~~(d)~~	Property management and subleasing. Providing shops subleasing and property management services for garment wholesalers and retailers in garment market.

The Company also provides general corporate services to its segments and these costs are reported as “Corporate and others”.

The Company used to have an operating segment named “Epidemic prevention supplies”, which included manufacturing, distribution and trading of epidemic prevention supplies. As the COVID-19 pandemic is getting better, the Company ceased to operate in the Epidemic prevention supplies business at the beginning of the quarter. The remaining assets of the segment was reclassified into the “Corporate and others” segment. The corresponding items of segment information for the earlier periods was restated to reflect the change of the new segment structure.

F-13

Selected information in the segment structure is presented in the following tables:

Revenues by segment for the three and ~~six~~nine months ended ~~September,~~December 31, 2022 and 2021 are as follows:

SCHEDULE OF SEGMENT REPORTING FOR REVENUE

		1		2		3		4
Revenues from external customers									2022		2021		2022		2021
	Three months ended				Six months ended				Three months ended				Nine months ended
	September 31,				September 31,				December 31,				December 31,
Revenues from external customers		2022		2021		2022		2021	2022		2021		2022		2021
Garments manufacturing segment		861		393,391		41,287		2,462,532		100,723		25,641		142,010		2,488,173
Logistics services segment		1,221,658		1,317,360		2,612,540		2,425,402		1,213,530		1,719,202		3,826,070		4,144,604
Property management and subleasing		920,201		1,047,081		1,875,036		2,156,329		796,343		1,046,627		2,671,379		3,202,956
Epidemic prevention supplies segment		1,299		-		1,540		-
Total of reportable segments and consolidated revenue	$	2,144,019	$	2,757,832	$	4,530,403	$	7,044,263
Total of reportable segments										2,110,596		2,791,470		6,639,459		9,835,733
Corporate and other										11,646		-		13,186		-
Total consolidated revenue									$	2,122,242	$	2,791,470	$	6,652,645	$	9,835,733

Intersegment revenue
Garments manufacturing segment		-		-		-		2,415		-		-		-		-

Income (loss) from operations by segment for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 are as follows:

SCHEDULE OF SEGMENT REPORTING FOR INCOME FROM OPERATION

		1			2			3			4		2022			2021			2022			2021
	Three months ended						Six months ended						Three months ended						Nine months ended
	September 30,						September 30,						December 31,						December 31,
		2022			2021			2022			2021		2022			2021			2022			2021
Garments manufacturing segment		(28,088	)		1,119			(56,744	)		124,748			7,745			(28,473	)		(48,999	)		96,275
Logistics services segment		152,381			105,246			272,422			110,109			91,147			100,769			363,569			210,878
Property management and subleasing		89,624			(24,120	)		123,721			33,091			131,213			14,844	)		254,934			47,935
Epidemic prevention supplies segment		(974	)		-			(974	)		-
Total of reportable segments	$	212,943		$	82,245		$	338,425		$	267,948		$	230,105		$	87,140		$	569,504		$	355,088
Corporate and other		(142,791	)		(120,508	)		(222,171	)		(229,511	)		(323,072	)		(114,816	)		(546,217	)		(344,327	)
Total consolidated income (loss) from operations		70,152			(38,263	)		116,254			38,437			(92,967	)		(27,676	)		23,287			10,761

Total assets by segment as ~~at September 30,~~of December 31, 2022 and March 31, 2022 are as follows:

SCHEDULE OF SEGMENT REPORTING FOR ASSETS

		1		2
Total assets		September 30, 2022		March 31, 2022	December 31, 2022		March 31, 2022
Garment manufacturing segment	$	1,611,781	$	1,784,020	$	1,735,455	$	1,784,020
Logistics services segment		2,662,834		2,610,469		2,903,654		2,610,469
Property management and subleasing		6,277,133		7,608,997		5,899,871		7,608,997
Epidemic prevention supplies		43,345		64,885
Total of reportable segments		10,595,093		12,068,371		10,538,980		12,003,486
Corporate and other		21,866,658		1,018,689		21,038,086		1,083,574
Consolidated total assets	$	32,461,751	$	13,087,060	$	31,577,066	$	13,087,060

Geographical Information

The Company operates predominantly in China. In presenting information on the basis of geographical location, revenue is based on the geographical location of customers and long-lived assets are based on the geographical location of the assets.

SCHEDULE OF GEOGRAPHICAL INFORMATION

Geographic Information

							2022		2021		2022		2021
	Three months ended September 30,			Six months ended September 30,			Three months ended December 31,				Nine months ended December 31,
		2022	2021		2022	2021	2022		2021		2022		2021
Revenues
China		2,144,019	2,757,832		4,530,403	7,044,263		2,122,242		2,791,470		6,652,645		9,835,733
Total		2,144,019	2,757,832		4,530,403	7,044,263		2,122,242		2,791,470		6,652,645		9,835,733

	September 30, 2022	March 31, 2022	December 31, 2022		March 31, 2022
Long-Lived Assets				-		-
China	5,028,480	7,397,932		4,297,074		7,397,932

F-14

13. LEASE RIGHT-OF-USE ASSET AND LEASE LIABILITIES

The Company recognized right-of-use asset as well as lease liability according to the ASC 842, Leases (with the exception of short-term leases). Lease liabilities are measured at present value of the sum of remaining rental payments as of ~~September 30,~~December 31, 2022, with discounted rate of 4.75%. A single lease cost is recognized over the lease term on a generally straight-line basis. All cash payments of operating lease cost are classified within operating activities in the statement of cash flows.

The Company leases its head office. The lease period is 5 years ~~years~~ with an option to extend the lease. The Company leases its plant and dormitory for 4.5 years with an option to extend the lease. The Company leased several floors in a commercial building for its sublease business for 3 years ~~years~~ with an option to extend the lease.

The Following table summarizes the components of lease expense:

SCHEDULE OF LEASE COST

		1		2		3		4	2022		2021		2022		2021
	Three months ended September 30,				Six months ended September 30,				Three months ended December 31,				Nine months ended December 31,
		2022		2021		2022		2021	2022		2021		2022		2021
Operating lease cost		876,509		975,894		1,821,058		1,910,560		902,455		968,170		2,723,514		2,878,730
Short-term lease cost		18,971		41,883		39,416		62,785		19,540		20,955		58,955		62,799
Total	$	895,480	$	1,017,777	$	1,860,474	$	1,973,345
Lease Cost									$	921,995	$	989,125	$	2,782,469	$	2,941,529

The following table summarizes supplemental information related to leases:

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

												2022			2021			2022			2021
	Three months ended September 30,						Six months ended September 30,					Three months ended December 31,						Nine months ended December 31,
		2022			2021			2022		2021		2022			2021			2022			2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow from operating leases	$	895,480		$	1,017,777			1,860,474		1,973,345		$	921,995		$	989,170			2,782,469			2,941,529
Right-of-use assets obtained in exchange for new operating leases liabilities		-			167,658			-		345,847			159,758			(3,390	)		(332,682	)		342,457
Weighted average remaining lease term - Operating leases (years)		1.3			2.3			1.3		2.3			1.1			2.0			1.1			2.0
Weighted average discount rate - Operating leases		4.75	%		4.75	%		4.75	%	4.75	%		4.75	%		4.75	%		4.75	%		4.75	%

The following table summarizes the maturity of operating lease liabilities:

SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITY

		1
Years ending September 30	Lease cost
Years ending December 31				Lease cost
2023	$	3,502,076		$	3,544,349
2024		963,525			115,966

2025					67,647
Total lease payments		4,465,601			3,727,962
Less: Interest		(244,208	)		(179,794	)
Total	$	4,221,393		$	3,548,168

14. RISKS AND UNCERTAINTIES

(a)

Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

(b)

Foreign Currency Translation

The Company’s reporting currency is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating subsidiaries is the Chinese Renminbi (“RMB”). For the subsidiaries whose functional currencies are the RMB, all assets and liabilities are translated at exchange rates at the balance sheet date, which was ~~7.116~~6.909 and 6.341 as of ~~September 30,~~December 31, 2022 and March 31, 2022, respectively. Revenue and expenses are translated at the average yearly exchange rates, which was ~~6.723~~6.852 and 6.466 for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustments to other comprehensive loss, a component of equity.

(c)

Concentration Risks

The followings are the percentages of accounts receivable balance of the top customers over accounts receivable for each segment as of ~~September 30,~~December 31, 2022 and March 31, 2022.

SCHEDULE OF CONCENTRATION RISKS

F-15

Garment manufacturing segment

	September 30, 2022		March 31, 2022		December 31, 2022			March 31, 2022
Customer A	89.0	%	85.3	%		82.0	%		85.3	%
Customer B	10.7	%	11.4	%		9.8	%		11.4	%
Customer C	0.3	%	Nil			7.8	%		Nil
Customer D						0.4	%		Nil

The high concentration as of ~~September 30,~~December 31, 2022 was mainly due to business development of a large distributor of garments. Management believes that should the Company lose any one of its major customers, it was able to sell similar products to other customers.

Logistics services segment

	September 30, 2022		March 31, 2022		December 31, 2022			March 31, 2022
Customer A	19.1	%	19.1	%		20.1	%		19.1	%
Customer B	10.1	%	3.9	%		7.7	%		3.9	%
Customer C	9.2	%	Nil	%		6.0	%		Nil	%
Customer D	8.7	%	0.1	%		5.5	%		8.2	%
Customer E	6.5	%	8.2	%		4.6	%		1.1	%

Property management and subleasing segment

There is no account receivable for Property management and subleasing segment as of both ~~September 30,~~December 31, 2022 and March 31, 2022.

~~Epidemic prevention supplies segment~~

~~The accounts receivable of Epidemic prevention supplies segment, as at both September 30, 2022 and March 31, 2022, was from one customer only.~~

For the three months ended ~~September 30, 2022, no customer provided more than 10% of total revenue of the Company. For the six months ended September 30,~~December 31, 2022, one customer from ~~garment~~logistics services segment provided more than 10% of total revenue of the Company, represented ~~10.5%~~ of total revenue of the Company for the six months. For the three and six months ended September 30, 2021, one customer from garment segment provided more than 10% of total revenue of the Company, represented ~~14.0%~~11.8% of total revenue of the Company for the three months. For the nine months ~~and~~ended December 31, 2022, one customer from logistics services segment provided more than ~~34.5%~~10% of total revenue of the Company, represented 10.8% of total revenue of the Company for the ~~six~~nine months. For the three months ended December 31, 2021, no customer provided more than 10% of total revenue of the Company. For nine months ended December 31, 2021, one customer from garment segment provided more than 10% of total revenue of the Company, represented 24.8% of total revenue for the nine months.

Management believes that should the Company lose any one of its major customers, it was able to sell similar products to other customers.

The following tables summarized the purchases from five largest suppliers of each of the reportable segment for the three and nine months ended ~~September 30,~~December 31, 2022 and 2021.

SCHEDULE OF PURCHASES FROM SUPPLIERS

Three months ended Six months ended
September 30, September 30,
2022 2021 2022 2021
Garment manufacturing segment Nil % 100.0 % Nil % 99.8 %
Logistics services segment 100.0 % 100.0 % 100.0 % 90.4 %
Property management and subleasing 100.0 % 100.0 % 100.0 % 100.0 %
Epidemic prevention supplies Nil % Nil % Nil % Nil %

	Three months ended						Nine months ended
	December 31,						December 31,
	2022			2021			2022			2021
Garment manufacturing segment		Nil	%		100.0	%		Nil	%		99.8	%
Logistics services segment		100.0	%		100.0	%		100.0	%		92.2	%
Property management and subleasing		100.0	%		100.0	%		100.0	%		100.0	%

(d)

Interest Rate Risk

The Company’s exposure to interest rate risk primarily relates to the interest expenses on our outstanding bank borrowings and the interest income generated by cash invested in cash deposits and liquid investments. As of ~~September 30,~~December 31, 2022, the total outstanding borrowings amounted to $~~134,245~~138,265 (RMB955,281) with various interest rate from 4.84% to 6.96% p.a. (Note 10)

(e)

COVID-19

The Coronavirus Disease (COVID-19) outbreak and the measures taken to contain the spread of the pandemic have created a high level of uncertainty to global economic prospects and this has impacted the Company’s operations and its financial performance in the last three quarters of the financial year and subsequent to the financial year end.

As the situation continues to evolve with significant level of uncertainty, the Company is unable to reasonably estimate the full financial impact of the COVID-19 outbreak. The Company is monitoring the situation closely and to mitigate the financial impact, it is conscientiously managing its cost by adopting an operating cost reduction strategy and conserving liquidity by working with major creditors to align repayment obligations with receivable collections.

15. SUBSEQUENT EVENTS

On January 4, 2023, Addentax Group Corp. (the “Company”) entered into a Securities Purchase Agreement (the “Securities Purchase Agreement) with certain accredited investors (the “Purchasers”), pursuant to which the Company received a net proceed of $15,000,000 in consideration of the issuance of:

● senior secured convertible notes in the aggregate original principal amount of $16,666,666.66 (the “Convertible Notes”);

● warrants to purchase up to 16,077,172 shares of common stock of the Company (the “Common Stock”) until on or prior to 11:59 p.m. (New York time) on the five year anniversary of the closing date at an exercise price of $1.25 per share.

The transactions contemplated under the Securities Purchase Agreement closed on January 4, 2023. The Company intends to use the proceeds from the issuance of the Convertible Notes and the PIPE Warrants for general corporate purposes.

The Convertible Notes bear interest at an interest rate of 5% per annum payable on each installment date commencing on the original date of issuance.

On January 10, 2023, the Company entered into an amendment (the “Amendment”, and the Original Purchase Agreement, as amended, the “Purchase Agreement”) to the Original Purchase Agreement with each Investor in accordance with the terms of the Original Purchase Agreement. Under the Amendment, the original increase in the authorized shares of the Company from 50,000,000 to 150,000,000 was increased to 250,000,000.

F-16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 should be read in conjunction with the Financial Statements and corresponding notes included in this Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Special Note Regarding Forward-Looking Statements in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “target”, “forecast” and similar expressions to identify forward-looking statements.

Overview

Our Business

We are a garment manufacturer and logistics services provider based in China. We are listed on the Nasdaq Capital Market under the symbol of “ATXG”. We classify our businesses into ~~four~~three segments: Garment manufacturing, Logistics services, and Property management and ~~subleasing,~~subleasing. We used to have an operating segment named “Epidemic prevention supplies”, which included manufacturing, distribution and trading of epidemic prevention supplies. As the COVID-19 pandemic is getting better, the Company ceased to operate in the Epidemic prevention ~~supplies.~~supplies business at the beginning of the quarter.

Our garment manufacturing business consists of sales made principally to wholesaler located in the People’s Republic of China (“PRC”). We have our own manufacturing facilities, with sufficient production capacity and skilled workers on production lines to ensure that we meet our ~~high quality~~high-quality control standards and timely delivery requirement for our customers. We conduct our garment manufacturing operations through three wholly owned subsidiaries, namely Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), Dongguan Yushang Clothing Co., Ltd (“YS”), and Shantou Yi Bai Yi Garments Co., Ltd (“YBY”) which are located in the Guangdong province, China.

Our logistic business consists of delivery and courier services covering approximately 79 cities in approximately seven provinces and two municipalities in China. Although we have our own motor vehicles and drivers, we currently outsource some of the business to our contractors. We believe outsourcing allows us to maximize our capacity and maintain flexibility while reducing capital expenditures and the costs of keeping drivers during slow seasons. We conduct our logistic operations through three wholly owned subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co., Ltd (“XKJ”), Shenzhen Yingxi Peng Fa Logistic Co., Ltd (“PF”) and Shenzhen Yingxi Tongda Logistic Co., Ltd (“TD”), which are located in the Guangdong province, China.

Our property management and subleasing provides shops subleasing and property management services for garment wholesalers and retailers in garment market. We conduct our property management and subleasing operation through a wholly owned subsidiary, namely Dongguan Yingxi Daying Commercial Co., Ltd (“DY”).

Our epidemic prevention supplies business consists of manufacturing and distribution of epidemic prevention products and resale of epidemic prevention supplies purchased from third party in both domestic and overseas markets. We conduct our manufacturing of the epidemic prevention products in Dongguan Yushang Clothing Co., Ltd (“YS”). We conduct the trading of epidemic prevention suppliers through Addentax Group Corp. (“ATXG”) and Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd (“YX”), a wholly owned subsidiary of the Company.

Business Objectives

Garment Manufacturing Business

We believe the strength of our garment manufacturing business is mainly due to our consistent emphasis on exceptional quality and timely delivery of our products. The primary business objective for our garment manufacturing segment is to expand our customer base and improve our profit.

Logistics Services Business

The business objective and future plan for our logistics services segment is to establish an efficient logistic system and to build a nationwide delivery and courier network in China. As of ~~September 30,~~December 31, 2022, we provide logistics services to over 79 cities in approximately seven provinces and two municipalities. We expect to develop an additional 20 logistics points in existing serving cities and improve the Company’s profit in the year end of 2023.

Property Management and Subleasing Business

The business objective of our property management and subleasing segment is to integrate resources in shopping mall, develop e-commerce bases and the Internet celebrity economy together to drive to increase the value of the stores in the area. The short-term goal for the year is to increase the occupancy rate of stores in the mall to more than 70%.

~~Epidemic Prevention Supplies Business~~

The primary objective of our epidemic prevention supplies business is to take the advantage of our resource in supply chain from the garment manufacturing business segment to facilitate and maximize the production, distribution and resale of epidemic prevention supplies, in order to increase our revenue base and improve our net profit.

Seasonality of Business

Our business is affected by seasonal trends, with higher levels of garment sales in our second and third quarters and higher logistics services revenue in our third and fourth quarters. These trends primarily result from the timing of seasonal garment manufacturing shipments and holiday periods in the logistics services segment.

Collection Policy

Garment manufacturing business

For our new customers, we generally require orders placed to be backed by advances or deposits. For our long-term and established customers with good payment track records, we generally provide payment terms between 30 to 180 days following their acknowledgement of receipt of goods.

Logistics services business

For logistics services, we generally receive payments from the customers between 30 to 90 days following the date of the registration of our receipt of packages.

Property management and subleasing business

For property management and subleasing business, we generally collect rental and management fees of the following month each month in advance.

~~Epidemic prevention supplies business~~

For Epidemic prevention supplies business, we generally receive payment from the customers within 30 days following the delivery of finished goods. We would also give our long-term customers with a 12 months long credit term policy to maintain a good business relationship.

Economic Uncertainty

Our business is dependent on consumer demand for our products and services. We believe that the significant uncertainty in the economy in China has increased our clients’ sensitivity to the cost of our products and services. We have experienced continued pricing pressure. If the economic environment becomes weak, the economic conditions could have a negative impact on our sales growth and operating margins, cash position and collection of accounts receivable. Additionally, business credit and liquidity have tightened in China. Some of our suppliers and customers may face credit issues and could experience cash flow problems and other financial hardships. These factors currently have not had an impact on the timeliness of receivable collections from our customers. We cannot predict at this time how this situation will develop and whether accounts receivable may need to be allowed for or written off in the coming quarters.

Despite the various risks and uncertainties associated with the current economy in China, we believe our core strengths will continue to allow us to execute our strategy for long-term sustainable growth in revenue, net income and operating cash flow.

Summary of Critical Accounting Policies

We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation involved could result in material changes to our financial position or results of operations under different conditions or using different assumptions.

Estimates and Assumptions

We regularly evaluate the accounting estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Revenue Recognition

Revenue is generated through sale of goods and delivery services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:

	(i)	identification of the promised goods and services in the contract;

	(ii)	determination of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the contract;

	(iii)	measurement of the transaction price, including the constraint on variable consideration;

	(iv)	allocation of the transaction price to the performance obligations; and

	(v)	recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.

For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product and service revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.

Leases

Lessee

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, The Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Lessor

As a lessor, the Company’s leases are classified as operating leases under ASC 842. Leases, in which the Company is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately. Rental income from operating leases is recognized on a ~~straight line~~straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a ~~straight line~~straight-line basis over the lease term.

Recently issued accounting pronouncements

Results of Operations for the three months ended ~~September 30,~~December 31, 2022 and 2021

The following tables summarize our results of operations for the three months ended ~~September 30,~~December 31, 2022 and 2021. The table and the discussion below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report.

Three Months Ended September 30, Changes in 2022
2022 2021 compared to 2021
(In U.S. dollars, except for percentages)
Revenue $ 2,144,019 100.0 % $ 2,757,832 100 % $ (613,813 ) (22.3 )%
Cost of revenues (1,578,858 ) (73.6 )% (2,287,407 ) (82.9 )% 708,549 31.0 %
Gross profit 565,161 26.4 % 470,425 17.1 % 94,736 20.1 %
Operating expenses (495,009 ) (23.1 )% (508,688 ) (18.4 )% 13,679 (2.7 )%
Income from operations 70,152 3.3 % (38,263 ) (1.4 )% 108.415 (283.3 )%
Other income, net 22,973 1.1 % 75,764 2.7 % (52,791 ) (69.7 )%
Net finance cost (447 ) (0.0 )% (521 ) (0.0 )% 74 (14.2 )%
Income tax expense (9,461 ) (0.4 )% (4,959 ) (0.2 )% (4,502 ) 90.8 %
Net income (loss) $ 83,217 3.9 % $ 32,021 1.2 % $ 51,196 159.9 %

	Three Months Ended December 31,										Changes in 2022
	2022					2021					compared to 2021
	(In U.S. dollars, except for percentages)
Revenue	$	2,122,242		100.0	%	$	2,791,470		100	%	$	(669,228	)	(24.0	)%
Cost of revenues		(1,514,780	)	(71.4	)%		(2,323,716	)	(83.2	)%		808,936		34.8	%
Gross profit		607,462		28.6	%		467,754		16.8	%		139,708		29.9	%
Operating expenses		(700,429	)	(33.0	)%		(495,430	)	(17.8	)%		(204,999	)	(41.4	)%
(Loss) income from operations		(92,967	)	(4.4	)%		(27,676	)	(1.0	)%		(65,291	)	(235.9	)%
Other income, net		19,232		0.9	%		43,958		1.6	%		(24,726	)	(56.2	)%
Net finance cost		(299	)	(0.0	)%		(2,454	)	(0.1	)%		2,155		14.2	%
Income tax expense		(8,184	)	(0.4	)%		(2,209	)	(0.1	)%		(5,975	)	(270.5	)%
Net (loss) income	$	(82,218	)	(3.9	)%	$	11,619		0.4	%	$	(93,837	)	(807.6	)%

Revenue

Total revenue for the three months ended ~~September 30,~~December 31, 2022 decreased by approximately ~~$0.6~~$0.7 million, or ~~22.3%~~24.0%, as compared with the three months ended ~~September 30,~~December 31, 2021. The decrease was mainly due to ~~a decrease~~an increase of approximately ~~$0.4~~$0.1 million in garment manufacturing, a decrease of approximately ~~$0.1~~$0.5 million in logistics services business, and a decrease of approximately ~~$0.1~~$0.3 million in property management and subleasing business.

~~There was nearly no~~The revenue generated from our garment manufacturing business ~~for the three months ended September 30, 2022. The revenue generated from the segment~~ was ~~$0.4~~$0.1 million, or approximately ~~14.3%~~4.7%, of total revenue for the three months ended ~~September 30,~~December 31, 2022. The revenue generated from the segment was $0.03 million, or approximately 0.9%, of total revenue for the three months ended December 31, 2021. The ~~decrease of approximately $0.4 million~~low revenue was mainly due to factory facilities ~~renewal~~renewals and ~~repair,~~repairs, and the remaining factories cannot provide as much capacity as previously. We estimate the manufacturing capacity will ~~appear to~~ recover inat end of the ~~third quarter of FY2023.~~fiscal year 2023.

Revenue generated from our logistics services business contributed approximately $1.2 million, or ~~57.0%~~57.2%, of our total revenue for the three months ended ~~September 30,~~December 31, 2022. Revenue generated from our logistic business contributed approximately ~~$1.3~~$1.7 million, or ~~47.8%~~61.6%, of our total revenue for the three months ended ~~September 30,~~December 31, 2021.

Revenue generated from our property management and subleasing business contributed approximately ~~$0.9~~$0.8 million, or ~~42.9%~~37.5%, of our total revenue for the three months ended ~~September 30,~~December 31, 2022. The revenue from this business segment was $1.0 million, or ~~38.0%~~37.5%, of our total revenue of this business for the three months ended ~~September 30, 2021.~~

There was only $1,299 generated from our epidemic prevention supplies business for the three months ended September 30, 2022 because no other orders were obtained in the quarter. The Company accepted sales orders very cautiously to make sure the sales orders can be matched with stable suppliers to secure profitability of each order. There was no revenue generated from this business for the three months ended September 30,December 31, 2021.

Cost of revenue

	Three months ended September 30,									Increase (decrease) in					Three months ended December 31,									Increase (decrease) in
	2022					2021				2022 compared to 2021					2022				2021					2022 compared to 2021
	(In U.S. dollars, except for percentages)														(In U.S. dollars, except for percentages)
Net revenue for garment manufacturing	$	861		100.0	%	$	393,391	100	%	$	(392,530	)	(99.8	)%	$	100,723	100.0	%	$	25,641		100	%	$	75,082		292.8	%
Raw materials		-		-	%		269,258	68.4	%		(263,580	)	(100.0	)%		771	0.8	%		8,829		34.4	%		(8,058	)	(91.3	)%
Labor		779		90.5	%		86,044	21.9	%		(85,265	)	(99.1	)%		64,108	63.7	%		12,783		49.9	%		51,325		401.5	%
Other and Overhead		584		67.8	%		6,420	0.5	%		(5,836	)	(90.9	)%		2,761	2.7	%		6,306		24.6	%		(3,545	)	(56.2	)%
Total cost of revenue for garment manufacturing		1,363		158.3	%		361,722	91.9	%		(360,359	)	(99.6	)%		67,640	67.2	%		27,918		108.9	%		39,722		142.3	%
Gross profit (loss) for garment manufacturing		(502	)	(58.3	)%		31,670	8.1	%		(32,171	)	(101.6	)%		33,083	32.8	%		(2,277	)	(8.9	)%		35,360		1,552.9	%

Net revenue for logistics services		1,221,658		100.0	%		1,317,360	100.0	%		(95,702	)	(7.3	)%		1,213,530	100.0	%		1,719,202		100.0	%		(505,672	)	(29.4	)%
Fuel, toll and other cost of logistics services		665,401		54.4	%		448,355	34.1	%		217,046		48.4	%		648,971	53.5	%		568,726		33.1	%		80,245		14.1	%
Subcontracting fees		196,105		16.1	%		539,417	40.9	%		(343,312	)	(63.6	)%		253,359	20.9	%		842,510		49.0	%		(589,151	)	(69.9	)%
Total cost of revenue for logistics services		861,506		70.5	%		987,772	75.0	%		(126,266	)	(12.8	)%		902,330	74.4	%		1,411,236		82.1	%		(508,906	)	(36.1	)%
Gross Profit for logistics services		360,152		29.5	%		329,588	25.0	%		30,564		9.3	%		311,200	25.6	%		307,967		17.9	%		3,233		1.0	%

Net revenue for property management and subleasing		920,201		100.0	%		1,047,081	100.0	%		(126,880	)	(12.1	)%		796,343	100.0	%		1,046,627		100.0	%		(250,284	)	(23.9	)%
Total cost of revenue for property management and subleasing		713,868		77.6	%		937,915	89.6	%		(224,047	)	(23.9	)%		536,732	67.4	%		884,556		84.5	%		(347,824	)	(39.3	)%
Gross Profit for property management and subleasing		206,333		22.4	%		109,165	10.4	%		97,168		89.0	%		259,611	32.6	%		162,071		15.5	%		97,540		60.2	%

Net revenue for epidemic prevention supplies	$	1,299		100.0	%	$	-				1,299
Net revenue for corporate and others															$	11,646	100.0	%	$	-					11,646
Merchandise/Finished goods/Raw materials		2,120		163.2	%		-				2,120					8,078	69.4	%		6					8,072
Total cost of revenue for epidemic prevention supplies		2,120		163.2	%		-				2,120
Gross (loss) income for epidemic prevention supplies		(821	)	(63.2	)%		-				(821	)
Total cost of revenue for corporate and others																8,078	69.4	%		6					8,072
Gross income (loss) for corporate and others																3,568	30.6	%		(6	)				3,574
Total cost of revenue	$	1,578,858		73.6	%	$	2,287,407	82.9	%	$	(708,549	)	(31.0	)%	$	1,514,780	71.4	%	$	2,323,716		83.2	%	$	(808,936	)	(34.8	)%
Gross profit	$	565,161		26.4	%	$	470,425	17.1	%	$	94,736		20.1	%	$	607,462	28.6	%	$	467,754		16.8	%	$	139,708		29.9	%

For our garment manufacturing business, we purchased the majority of our raw materials directly from numerous local fabric and accessories suppliers.

Raw material costs for our garment manufacturing business was ~~nil~~$771 in the three months ended ~~September 30,~~December 31, 2022, as compared with ~~approximately $0.3 million~~$8,829 in the three months ended ~~September 30,~~December 31, 2021.

Labor costs for our garment manufacturing business was $64,108, approximately ~~90.5%~~63.7% of our total garment manufacturing business revenue in the three months ended ~~September 30,~~December 31, 2022, as compared with $12,783, approximately ~~21.9%~~49.9% in the three months ended ~~September 30,~~December 31, 2021. The increase was mainly due to the rising wages in the PRC.

Overhead and other expenses for our garment manufacturing business accounted for $2,761, approximately ~~67.8%~~2.7% of our total garment business revenue for the three months ended ~~September 30,~~December 31, 2022, as compared with $6,306, approximately ~~0.5%~~24.6% of total garment business revenue for the three months ended ~~September 30,~~December 31, 2021.

For our logistic business, we outsource some of the business to our contractors. The Company relied on a few subcontractors, in which the subcontracting fees to our largest contractor represented approximately ~~26.7%~~20.9% and ~~35.6%~~29.9% of total cost of revenues for our service segment for the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively. The decrease was mainly due to our usage of our own logistics more than the subcontractors during the COVID-19 epidemic. We have not experienced any disputes with our subcontractors and we believe we maintain good relationships with our contract logistics services provider.

Fuel, toll and other costs for our service business for the three months ended ~~September 30,~~December 31, 2022 were approximately ~~$0.7~~$0.6 million as compared with ~~$0.4~~$0.6 million for the three months ended ~~September 30,~~December 31, 2021. Fuel, toll and other costs for our service business accounted for approximately ~~54.4%~~53.5% of our total service revenue for the three months ended ~~September 30,~~December 31, 2022, as compared with approximately ~~34.1%~~33.1% for the three months ended ~~September 30,~~December 31, 2021. The increase was primarily attributable to a decrease in the use of subcontractors under the COVID-19 epidemic circumstance.

Subcontracting fees for our service business for the three months ended ~~September 30,~~December 31, 2022 decreased significantly by approximately ~~63.6%~~69.9% to approximately ~~$0.2~~$0.3 million from ~~$0.5~~$0.8 million for the three months ended ~~September 30,~~December 31, 2021. Subcontracting fees accounted for approximately ~~16.1%~~20.9% and ~~40.9%~~49.0% of our total service business revenue in the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively. The decrease was primarily due to the Company used less subcontractors under the COVID-19 epidemic circumstance.

For property management and subleasing business, the cost of revenue was mainly the amortization of operating lease assets for the subleasing business.

~~For epidemic prevention supplies business, we have trading and own production segments.~~ The cost of revenue for property management and subleasing business for the three months ended December 31, 2022 was ~~predominately the cost of merchandise and cost~~$536,732, approximately 67.4% of our ~~own products.~~total property management and subleasing business revenue, as compared with $884,556, approximately 84.5% of total property management and subleasing business revenue for the three months ended December 31, 2022.

Gross profit

Garment manufacturing business gross ~~loss~~profit for the three months ended ~~September 30,~~December 31, 2022 was approximately ~~$502,~~$33,082, as compared with a gross ~~profit~~loss of approximately ~~$31,670~~$2,278 for the three months ended ~~September 30,~~December 31, 2021. Gross ~~loss~~profit accounted for ~~-58.3%~~32.8% of our total Garment manufacturing business revenue for the three months ended ~~September 30,~~December 31, 2022, as compared with a gross ~~profit~~loss of ~~8.1%~~8.9% for the three months ended ~~September 30,~~December 31, 2021.

Gross profit in our logistics services business for the three months ended ~~September 30,~~December 31, 2022 was approximately ~~$0.4~~$0.3 million and gross margin was ~~29.5%~~25.6%. Gross profit in our logistics services business for the three months ended ~~September 30,~~December 31, 2021 was approximately $0.3 million and gross margin was ~~25.0%~~17.9%. The increase of gross profit margin was mainly attributable to a decrease of operating expenses due to replacement of old vehicles and shifting our strategic focus on high margin customers.

Gross profit in our property management and subleasing business for the three months ended ~~September 30,~~December 31, 2022 was approximately ~~$0.2~~$0.3 million, or ~~22.4%~~32.6%, of our total property management and subleasing business revenue. It was approximately ~~$0.1~~$0.2 million, or ~~10.4%~~15.5%, for the three months ended ~~September 30,~~December 31, 2021.

	Three months ended December 31,										Increase (decrease) in
	2022					2021					2022 compared to 2021
	(In U.S. dollars, except for percentages)
Gross profit	$	607,462		100	%	$	467,754		100	%		139,708		29.9	%
Operating expenses:
Selling expenses		(24,511	)	(4.0	)%		(43,118	)	(9.2	)%		18,607		43.2	%
General and administrative expenses		(675,918	)	(111.3	)%		(452,312	)	(96.7	)%		(223,606	)	(49.4	)%
Total	$	(700,429	)	(115.3	)%	$	(495,430	)	(105.9	)%		(204,999	)	(41.4	)%
Loss from operations	$	(92,967	)	(15.3	)%	$	(27,676	)	(5.9	)%		(65,291	)	(235.9	)%

Three months ended September 30, Increase (decrease) in
2022 2021 2022 compared to 2021
(In U.S. dollars, except for percentages)
Gross profit $ 565,161 100 % $ 470,425 100 % 94,736 20.1 %
Operating expenses:
Selling expenses (30,002 ) (5.3 )% (45,802 ) (9.7 )% 15,800 34.5 %
General and administrative expenses (465,007 ) (82.3 )% (462,886 ) (98.4 )% (2,121 ) (0.5 )%
Total $ (495,009 ) (87.6 )% $ (508,688 ) (108.1 )% 13,679 2.7 %
Income from operations $ 70,152 12.4 % $ (38,263 ) (8.1 )% 108,415 283.3 %

Selling, General and administrative expenses

Our selling expenses were mainly incurred for our property management and subleasing business. It was approximately ~~$0.03~~$0.02 million and ~~$0.07~~$0.04 million for the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Selling expenses consist primarily of advertisement, local transportation, unloading charges and product inspection charges.

Our general and administrative expenses in our ~~Garment~~garment manufacturing business segment for the three months ended ~~September 30,~~December 31, 2022 and 2021 was both approximately $0.03 million. Our general and administrative expenses in our logistics services segment, for the three months ended ~~September 30,~~December 31, 2022 and 2021 was both approximately $0.2 million. The general and administrative expenses in our property management and subleasing business remained stable at approximately ~~$0.09~~$0.1 million for the three months ended ~~September 30,~~December 31, 2022 and 2021. Our general and administrative expenses ~~in our epidemic prevention supplies segment was both nil~~ for the three months ended ~~September 30,~~December 31, 2022 and 2021 ~~respectively. Our general~~was approximately $0.3 million and ~~administrative expenses in our corporate office for the three months ended September 30, 2022 and 2021 remained stable at approximately~~ $0.1 ~~million.~~million, respectively. General and administrative expenses consist primarily of administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Total general and administrative expenses for the three months ended ~~September 30,~~December 31, 2022 increased by approximately ~~0.5%~~0.2% to approximately ~~$0.47~~$0.68 million from ~~$0.46~~$0.45 million for the three months ended ~~September 30,~~December 31, 2021.

~~Income (Loss)~~Loss from operations

~~Income (loss)~~Loss from operations for the three months ended ~~September 30,~~December 31, 2022 and 2021 was approximately ~~$0.07~~$0.09 million and ~~($0.04)~~$0.03 million, respectively. ~~(Loss)~~ Income (loss) from operations of approximately ~~($28,088)~~$7,745 and ~~$1,119~~($28,473) was attributed from our garment manufacturing segment for the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Income from operations of approximately ~~$0.15 million~~$91,147 and ~~$0.1 million~~$100,769 was attributed from our logistics services segment for the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Income from operations of approximately ~~$0.09 million~~$131,213 and ~~$0.02 million~~$14,844 was attributed from our property management and subleasing business for the three months ended September 30, 2022 and 2021, respectively. There was a loss of approximately $974 and nil from operations attributed from our epidemic prevention supplies segment for the three months ended September 30,December 31, 2022 and 2021, respectively. We incurred a loss from operations in corporate office of approximately ~~$0.1~~$0.3 million and $0.1 million for ~~both~~ the three months ended ~~September 30,~~December 31, 2022 and 2021. The loss ~~from our corporate office~~ was mainly due to increase in ~~legal and professional fees to comply with the SEC accounting, disclosure and reporting requirements.~~administrative expenses.

Income Tax Expenses

Income tax expense for the three months ended ~~September 30,~~December 31, 2022 and 2021 was approximately ~~$0.009 million~~$8,184 and ~~$0.005~~$2,209 million, respectively. The Company operates in the PRC and files tax returns in the PRC jurisdictions.

Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands, and is not subject to income taxes.

Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive tax rate of 16.5%. No provision for income taxes in Hong Kong have been made as Yingxi HK had no taxable income for the three months ended ~~September 30,~~December 31, 2022 and 2021.

QYTG and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (“EIT”) rate is 25%. No provision for income taxes in the PRC have been made as QYTG and YX had no taxable income for the three months ended ~~September 30,~~December 31, 2022 and 2021.

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies are subject to progressive EIT rates from 5% to 15% in 2022. The preferential tax rates will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

The Company’s parent entity, Addentax Group Corp. is a U.S entity and is subject to the United States federal income tax. No provision for income taxes in the United States have been made as Addentax Group Corp. had no United States taxable income for the three months ended ~~September 30,~~December 31, 2022 and 2021.

Net Income (Loss)

We incurred net ~~income~~loss of approximately $0.08 million and ~~$0.03~~net income of $0.01 million for the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Our basic and diluted earnings per share were $0.00 and $0.00 for the three months ended ~~September 30,~~December 31, 2022 and 2021, respectively.

Results of Operations for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021

The following tables summarize our results of operations for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021. The table and the discussion below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report.

	Six months Ended September 30,										Changes in 2022					Nine months Ended December 31,										Changes in 2022
	2022					2021					compared to 2021					2022					2021					compared to 2021
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Revenue	$	4,530,403		100.0	%	$	7,044,263		100.0	%	$	(2,513,860	)	(35.7	)%	$	6,652,645		100.0	%	$	9,835,733		100.0	%	$	(3,183,088	)	(32.4	)%
Cost of revenues		(3,508,558	)	(77.4	)%		(5,990,433	)	(85.0	)%		2,481,875		41.4	%		(5,023,338	)	(75.5	)%		(8,314,149	)	(84.5	)%		3,290,811		39.6	%
Gross profit		1,021,845		22.6	%		1,053,830		15.0	%		(31,985	)	(3.0	)%		1,629,307		24.5	%		1,521,584		15.5	%		107,723		7.1	%
Operating expenses		(905,591	)	(20.0	)%		(1,015,393	)	(14.4	)%		109,802		10.8	%		(1,606,020	)	(24.1	)%		(1,510,823	)	(15.4	)%		(95,197	)	(6.3	)%
Income from operations		116,254		2.6	%		38,437		0.6	%		77,817		(202.5	)%		23,287		0.4	%		10,761		0.1	%		12,526		116.4	%
Other income, net		74,056		1.6	%		89,001		1.3	%		(14,945	)	(16.8	)%		93,288		1.4	%		132,959		1.3	%		(39,671	)	(29.8	)%
Net finance cost		333		(0.0	)%		(786	)	(0.0	)%		1,119		142.4	%		34		(0.0	)%		(3,240	)	(0.0	)%		3,274		142.4	%
Income tax expense		(10,755	)	(0.2	)%		(15,684	)	(0.2	)%		4,929		31.4	%		(18,939	)	(0.3	)%		(17,893	)	(0.2	)%		(1,046	)	(5.8	)%
Net income	$	179,888		4.0	%	$	110,968		1.6	%	$	68,920		62.1	%	$	97,670		1.5	%	$	122,587		1.2	%	$	(24,917	)	(20.3	)%

Revenue

Total revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 decreased by approximately ~~$2.5~~$3.2 million, or ~~35.7%~~32.4%, as compared with the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The decrease was mainly due to the significant decrease of Garment Manufacturing Business.

~~Losses~~Revenue generated from our garment manufacturing business contributed approximately ~~$0.04~~$0.1 million ~~(0.9%~~(4.7%) and $2.5 million ~~(35.0%~~(25.3%) of total ~~losses~~revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. The decrease mainly due to factory facilities renewal and repair, remaining factories cannot provide as much capacity as previously. We estimate the capacity will appear to recover ~~in the third quarter~~by end of FY2023.

Revenue generated from our logistics services business contributed approximately ~~$2.6~~$3.8 million, or ~~57.7%~~57.5%, of our total revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022. Revenue generated from our logistic business contributed approximately ~~$2.4~~$4.1 million, or ~~34.4%~~42.1%, of our total revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The ~~increase~~decrease of ~~$0.2~~$0.3 million was due to ~~XKJ’s sales were $0.3 million higher than~~decrease of revenue from YXPF compared to the ~~six~~nine months ended ~~September 30,~~December 31, 2021.

Revenue generated from our property management and subleasing business contributed approximately ~~$1.9~~$2.7 million, or ~~41.4%~~40.2%, of our total revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022. Revenue generated from our property management and subleasing business contributed approximately ~~$2.2~~$3.2 million, or ~~30.6%~~32.6%, of our total revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2021.

There was only a minor sale of $1,540 of epidemic prevention supplies products for the six months ended September 30, 2022. There was no revenue generated from our epidemic prevention supplies business for the six months ended September 30, 2021 because no profitable orders were obtained in the quarter. The Company accepted sales orders very cautiously to ensure the sales orders can be matched with stable suppliers to secure profitability of each order.

Cost of revenue

	Six months ended September 30,									Increase (decrease) in					Nine months ended December 31,									Increase (decrease) in
	2022					2021				2022 compared to 2021					2022				2021					2022 compared to 2021
	(In U.S. dollars, except for percentages)														(In U.S. dollars, except for percentages)
Net revenue for garment manufacturing	$	41,287		100.0	%	$	2,462,532	100.0	%	$	(2,421,245	)	(98.3	)%	$	142,010	100.0	%	$	2,488,173		100.0	%	$	(2,346,163	)	(94.3	)%
Raw materials		27,551		66.7	%		1,710,591	69.5	%		(1,683,040	)	(98.4	)%		28,323	19.9	%		1,719,420		69.1	%		(1,691,097	)	(98.4	)%
Labor		9,268		22.4	%		529,335	21.5	%		(520,067	)	(98.2	)%		73,376	51.7	%		542,118		21.8	%		(468,742	)	(86.5	)%
Other and Overhead		1,619		3.9	%		16,818	0.7	%		(15,199	)	(90.4	)%		4,380	3.1	%		23,124		0.9	%		(18,744	)	(81.1	)%
Total cost of revenue for garment manufacturing		38,438		93.1	%		2,256,744	91.6	%		(2,218,306	)	(98.3	)%		106,079	74.7	%		2,284,662		91.8	%		(2,178,583	)	(95.4	)%
Gross profit for garment manufacturing		2,849		6.9	%		205,789	8.4	%		(202,940	)	(98.6	)%		35,931	25.3	%		203,511		8.2	%		(167,580	)	(82.3	)%

Net revenue for logistics services		2,612,540		100.0	%		2,425,402	100.0	%		187,138		7.7	%		3,826,070	100.0	%		4,144,604		100.0	%		(318,534	)	(7.7	)%
Fuel, toll and other cost of logistics services		1,267,987		48.5	%		841,505	34.7	%		426,482		50.7	%		1,916,957	50.1	%		1,410,231		34.0	%		506,726		35.9	%
Subcontracting fees		637,301		24.4	%		1,026,138	42.3	%		(388,837	)	(37.9	)%		890,660	23.3	%		1,868,648		45.1	%		(977,988	)	(52.3	)%
Total cost of revenue for logistics services		1,905,288		72.9	%		1,867,643	77.0	%		37,645		2.0	%		2,807,617	73.4	%		3,278,879		79.1	%		(471,262	)	(14.4	)%
Gross Profit for logistics services		707,253		27.1	%		557,758	23.0	%		149,495		26.8	%		1,018,453	26.6	%		865,725		20.9	%		152,728		17.6	%

Net revenue for property management and subleasing		1,875,036		100.0	%		2,156,329	100.0			(281,293	)	(13.0	)%		2,671,379	100.0	%		3,202,956		100.0	%		(531,577	)	(16.6	)%
Total cost of revenue for property management and subleasing		1,562,318		83.3	%		1,864,557	86.5			(302,239	)	(16.2	)%		2,099,050	78.6	%		2,749,114		85.8	%		(650,064	)	(23.6	)%
Gross Profit for property management and subleasing		312,718		16.7	%		291,771	13.5			20,947		7.2	%		572,329	21.4	%		453,842		14.2	%		118,487		26.1	%

Net revenue for epidemic prevention supplies	$	1,540		100.0	%	$	-	%			1,540
Merchandise/Finished goods/Raw materials		2,514		163.2	%		-	%			2,514
Total cost of revenue for epidemic prevention supplies		2,514		163.2	%		-	%			2,514
Gross loss for epidemic prevention supplies		(974	)	(63.2	)%		-	%			(974	)
Net revenue for corporate and others															$	13,186	100.0	%	$	-					13,186
Other and Overhead																10,592	80.3	%		1,494					9,098		609.0	%
Total cost of revenue for corporate and others																10,592	80.3	%		1,494					9,098		609.0	%
Gross profit (loss) for corporate and others																2,594	19.7	%		(1,494	)				4,088		273.6	%
Total cost of revenue	$	3,508,558		77.6	%	$	5,990,433	85.0	%	$	(2,481,875	)	(41.4	)%	$	5,023,338	75.5	%	$	8,314,149		84.5	%	$	(3,290,811	)	(39.6	)%
Gross profit	$	1,021,845		22.4	%	$	1,053,830	15.0	%	$	(31,985	)	(3.0	)%	$	1,629,307	24.5	%	$	1,521,584		15.5	%	$	107,723		7.1	%

For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers.

Raw material costs for our garment manufacturing business were ~~approximately66.7%~~$28,313, approximately 19.9% of our total garment manufacturing business revenue in the ~~six~~nine months ended ~~September 30,~~December 31, 2022, as compared with ~~69.5%~~$1,719,420, approximately 69.1% in the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The decrease was mainly due to the decrease of the average purchase cost of the raw materials.

Labor costs for our garment manufacturing business were $73,376, approximately ~~22.4%~~51.7% of our total garment manufacturing business revenue in the ~~six~~nine months ended ~~September 30,~~December 31, 2022, as compared with ~~21.5%~~$542,118, approximately 21.8% in the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The increase was mainly due to the rising wages in the PRC.

Overhead and other expenses for our garment manufacturing business accounted for $4,380, approximately ~~3.9%~~3.1% of our total garment business revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022, as compared with ~~0.7%~~$23,124, 0.9% of total garment business revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2021.

For our logistic business, we outsourced some of the business to our contractors. The Company relied on a few subcontractors, in which the subcontracting fees to our largest subcontractor represented approximately ~~24.4%~~25.8% and ~~18.8%~~30.3% of total cost of revenues for our service segment for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. The percentage decreased was due to the usage of our own logistics more than usage of the subcontractors under COVID-19 epidemic. We have not experienced any disputes with our subcontractors and we believe we maintain good relationships with our contract logistics services providers.

Fuel, toll and other costs for our service business for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 were approximately ~~$1.3~~$1.9 million compared with ~~$0.8~~$1.4 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2021. Fuel, toll and other costs for our service business accounted for approximately ~~48.5%~~50.1% of our total service revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022, as compared with ~~34.7%~~34.0% for the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The increase was primarily attributable to the decrease of use of subcontractors under the COVID-19 epidemic circumstance.

Subcontracting fees for our service business for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 decreased approximately ~~37.9%~~52.3% to approximately ~~$0.6~~$0.9 million from ~~$1.0~~$1.9 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2021. Subcontracting fees accounted for approximately ~~24.4%~~23.3% and ~~42.3%~~45.1% of our total service business revenue in the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. This decrease was primarily because the Company used less subcontractors under the epidemic circumstance.

For property management and subleasing business, the cost of revenue was mainly the amortization of operating lease assets for the subleasing business.

~~For epidemic prevention supplies business, we have trading and own production.~~ The cost of revenue ~~included cost of merchandise~~for property management and ~~cost~~subleasing business for the nine months ended December 31, 2022 was $2,099,050, approximately 78.6% of our ~~own products.~~total property management and subleasing business revenue, as compared with $2,749,114, approximately 85.8% of total property management and subleasing business revenue for the nine months ended December 31, 2022.

Gross profit

Garment manufacturing business generated a gross profit of approximately ~~$2,849~~$35,931 for the ~~six~~nine months ended ~~September 30,~~December 31, 2022. There was approximately $0.2 million gross profit for the ~~six~~nine months ended ~~September 30,~~December 31, 2021. Gross profit accounted for ~~6.9%~~25.3% of our total Garment manufacturing business revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022, as compared ~~with~~to a gross profit of ~~8.4%~~8.2% for the ~~six~~nine months ended ~~September 30,~~December 31, 2021.

Gross profit in our logistics services business for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 was approximately ~~$0.7~~$1.0 million and gross margin was ~~27.1%~~26.6%. Gross profit in our logistics services business for the ~~six~~nine months ended ~~September 30,~~December 31, 2021 was approximately ~~$0.6~~$0.9 million and gross margin was ~~23.0%~~20.9%. The increase of gross profit ratio was mainly attributable to a decrease of subcontracting fees under the COVID-19 epidemic circumstances and a decrease of operating expenses due to replacement of old vehicles and shifting our strategic focus on high margin customers.

Gross profit in our property management and subleasing business for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021was ~~both~~ approximately ~~$0.3 million.~~$0.6 million and $0.5 million, respectively. It accounted for approximately ~~16.7%~~21.4% and ~~13.5%~~14.2% of our total property management and subleasing business revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively.

	Six months ended September 30,										Increase (decrease) in					Nine months ended December 31,										Increase (decrease) in
	2022					2021					2022 compared to 2021					2022					2021					2022 compared to 2021
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Gross profit	$	1,021,845		100	%	$	1,053,830		100	%		(31,985	)	(3.0	)%	$	1,629,307		100	%	$	1,521,584		100	%		107,723		7.1	%
Operating expenses:
Selling expenses		(35,644	)	(3.5	)%		(92,192	)	(8.7	)%		56,548		61.3	%		(60,155	)	(3.7	)%		(135,310	)	(8.9	)%		75,155		55.5	%
General and administrative expenses		(869,947	)	(85.7	)%		(923,201	)	(87.6	)%		53,254		5.8	%		(1,545,865	)	(94.9	)%		(1,375,513	)	(90.4	)%		(170,352	)	(12.4	)%
Total	$	(905,591	)	(89.2	)%	$	(1,015,393	)	(96.4	)%		109,802		10.8	%	$	(1,606,020	)	(98.6	)%	$	(1,510,823	)	(99.3	)%		(95,197	)	(6.3	)%
Income from operations	$	116,254		10.8	%	$	38,437		3.6	%		77,817		202.5	%	$	23,287		1.4	%	$	10,761		0.7	%		12,526		116.4	%

Selling, General and administrative expenses

Our selling expenses in our Garment manufacturing business segment for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 was ~~nil~~approximately $110 and ~~approximately $0.001 million,~~$261, respectively. Our selling expenses in our logistics services segment was nil for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and ~~2021, respectively.~~2021. Selling expenses in our property management and subleasing business was ~~$0.04~~$0.06 million and ~~$0.09~~$0.1 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. ~~Selling expenses in our epidemic prevention supplies segment was nil for both the six months ended September 30, 2021 and 2020.~~ Selling expenses consist primarily of advertisement, local transportation, unloading charges and product inspection charges. Total selling expenses for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 decreased significantly by approximately ~~61.3%~~64.1% to ~~$0.04~~$0.1 million from ~~$0.09~~$0.4 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2021.

Our general and administrative expenses in our Garment manufacturing business segment was approximately ~~$0.06~~$0.08 million and ~~$0.08~~$0.1 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Our general and administrative expenses in our logistics services segment, for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 was both approximately ~~$0.4~~$0.7 million. The general and administrative expenses in our property management and subleasing business was approximately ~~$0.2~~$0.3 million for both the ~~six~~nine months ended ~~September 30, 2022 and 2021. Our general and administrative expenses in our epidemic prevention supplies segment was nil for both the six months ended September 30,~~December 31, 2022 and 2021. Our general and administrative expenses in our corporate office for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 was ~~both~~ approximately ~~$0.2 million.~~$0.5 million and $0.3 million, respectively. General and administrative expenses consist primarily of administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Total general and administrative expenses for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 was ~~nearly~~as approximately $0.2 million, or 12.4% higher than as compared to the ~~same as that for the six~~nine months ended ~~September 30,~~December 31, 2021.

Income ~~(loss)~~ from operations

Income from operations was approximately ~~$0.1~~$0.02 million and ~~$0.04~~$0.01 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Loss from operations of approximately ~~$0.06~~$0.05 million was attributed from our garment manufacturing segment for the ~~six~~nine months ended ~~September 30,~~December 31, 2022. Income from operations of approximately $0.1 million was attributed from our garment manufacturing segment for the ~~six~~nine months ended ~~September 30,~~December 31, 2021. Income from operations of approximately ~~$0.3~~$0.4 million and ~~$0.1~~$0.2 million was attributed from our logistics services segment for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively. Our property management and subleasing business segment generated approximately ~~$0.1~~$0.3 million and $0.05 million income from operations ~~and approximately $0.03 million loss from operations~~ for the ~~six~~nine months ended ~~September 30, 2022 and 2021, respectively. Loss from operations of $974 and nil was attributed from our epidemic prevention supplies segment for the six months ended September 30,~~December 31, 2022 and 2021, respectively. We incurred a loss from operations in corporate office of approximately ~~$0.2~~$0.5 million and $0.3 million for ~~both~~ the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and ~~2021.~~2021, respectively. The loss ~~from our corporate office~~ was mainly due to an increase in ~~legal and professional fees to comply with the SEC accounting, disclosure and reporting requirements.~~administrative expenses.

Income Tax Expenses

Income tax expense for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 was approximately ~~$10,755~~$18,939 and ~~$15,684,~~$17,893, respectively. The Company operates in the PRC and files tax returns in the PRC jurisdictions.

Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands, and is not subject to income taxes.

Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive tax rate of 16.5%. No provision for income taxes in Hong Kong have been made as Yingxi HK had no taxable income for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021.

QYTG and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (EIT) rate is 25%. No provision for income taxes in the PRC have been made as QYTG and YX had no taxable income for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021.

The Company’s parent entity, Addentax Group Corp. is a U.S entity and is subject to the United States federal income tax. No provision for income taxes in the United States have been made as Addentax ~~aGroup~~Group Corp. had no United States taxable income for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021.

Net Income (Loss)

We incurred a net income of approximately ~~$0.2 million and~~ $0.1 million for both the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and ~~2021, respectively.~~2021. Our basic and diluted earnings per share were ~~$0.01~~$0.00 and $0.00 for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021, respectively.

Summary of cash flows

Summary cash flows information for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 is as follow:

Six months ended September 30,
2022 2021
(In U.S. dollars)
Net cash (used in) provided by operating activities
$ (1,526,530 ) $ 150,482
Net cash used in investing activities
$ (17,500,000 ) $ (142,922 )
Net cash provided by (used in) financing activities
$ 19,649,438 $ (1,138,547 )

	Nine months ended December 31,
	2022			2021
	(In U.S. dollars)
Net cash (used in) provided by operating activities	$	(1,528,118	)	$	383,825
Net cash used in investing activities	$	(17,500,000	)	$	(176,268	)
Net cash provided by (used in) financing activities	$	19,240,977		$	(1,543,573	)

Net cash provided by operating activities in the ~~six~~nine months ended ~~September 30,~~December 31, 2022 was approximately $1.7 million less ~~than that of~~as compared to the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The decrease ~~mainly because~~was predominately due to the movement of operating assets and liabilities of the ~~six~~nine months ended ~~September 30,~~December 31, 2022 resulted in cash outflow of approximately $1.9 million, while the movement of operating assets and liabilities of the ~~six~~nine months ended ~~September 30,~~December 31, 2021 resulted in cash inflow of approximately ~~$0.5~~$0.2 million. We will continue to improve our operating cash flow by closely monitoring the timely collection of accounts and other receivables. We generally do not hold any significant inventory for more than ninety days, as we typically manufacture upon customers’ ~~order.~~orders.

Net cash used in investing activities for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 was approximately $17.5 million, which was approximately ~~$17.4~~$17.3 million more ~~than that of~~as compared to the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The increase was ~~mainly because there was~~predominately due to a purchase of debt securities in the ~~six~~nine months ended ~~September 30,~~December 31, 2022.

Net cash provided by financing activities for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 was approximately $20.8 million more than the ~~six~~nine months ended ~~September 30,~~December 31, 2021. The increase was ~~mainly because~~predominately due to the Company received approximately $20.2 million proceeds from its initial public offering, and the net cash repayment of related party borrowings in current period was approximately ~~$1.1~~$0.5 million less ~~than that of~~as compared to the ~~six~~nine months ended ~~September 30,~~December 31, 2021.

Financial Condition, Liquidity and Capital Resources

As of ~~September 30,~~December 31, 2022, we had cash on hand of approximately ~~$2.0~~$1.6 million, total current assets of approximately ~~$27.4~~$27.3 million and current liabilities of approximately ~~$8.6~~$8.5 million. ~~We presently~~Currently, we finance our operations by using the cash flows from revenue, fund raising from ~~IPO~~our initial public offering proceedings and capital contributions from ~~the CEO.~~our chief executive officer, Mr. Hong Zhida (the “CEO”). In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, the CEO has indicated the intent and ability to provide additional equity financing.

Foreign Currency Translation Risk

Our operations are located in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility in foreign exchange rates between the U.S. dollar and the Chinese Renminbi (“RMB”). All of our sales are in RMB. In the past years, RMB continued to appreciate against the U.S. dollar. As of ~~September 30,~~December 31, 2022, the market foreign exchange rate was ~~RMB 7.116~~RMB6.909 to one U.S. dollar. Our financial statements are translated into U.S. dollars using the closing rate method. The balance sheet items are translated into U.S. dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the period. All translation adjustments are included in accumulated other comprehensive income in the statement of equity. The foreign currency translation gain (loss) for the ~~six~~nine months ended ~~September 30,~~December 31, 2022 and 2021 was approximately $0.2 million and ~~$(0.03)~~$(0.06) million respectively.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of ~~September 30,~~December 31, 2022 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2022. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Changes in Internal Controls over Financial Reporting

There was no change in the Company’s internal control over financial reporting period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

Item 1A. Risk Factors

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

There is no other information required to be disclosed under this item, which was not previously disclosed.

Item 6. Exhibits

Exhibit Number		Description
(31)		Rule 13a-14 (d)/15d-14d) Certifications
31.1*		Section 302 Certification by the Principal Executive Officer
31.2*		Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1*		Section 906 Certification by the Principal Executive Officer
32.2*		Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer
101*		Interactive Data File
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (Embedded within the Inline XBRL document)

*Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Addentax Group Corp.

Date: ~~November~~February 14, ~~2022~~2023	By:	/s/ Hong Zhida
		Hong Zhida
		President, Chief Executive Officer and Director,
		(Principal Executive Officer)

Date: ~~November~~February 14, ~~2022~~2023	By:	/s/ Huang Chao
		Huang Chao
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)